Yakutia head: We will turn to Gokhran only if absolutely necessary, no need so far

MOSCOW. March 12 (Interfax) - Alrosa will seek assistance from the State Precious Metals and Gemstones Repository (Gokhran) only in case of real necessity, which is not the case at the moment, as the diamond market is showing initial signs of stabilization, the head of Yakutia Aysen Nikolayev said in an interview with Interfax.

Yakutia is one of the key shareholders of the diamond mining company, which has been facing difficulties due to poor market conditions and sanctions.

"The option [of selling part of production to Gokhran] exists optionally. It has been discussed with everyone. However, we understand that we will only resort to this if there is a real need. There are early signs of stabilization in the market, but it is too soon to draw conclusions," Nikolayev said in response to a question about possibly turning to Gokhran this year.

In March 2024, Alrosa, which accounts for 95% of Russia's diamond production, signed an agreement with the Finance Ministry, which oversees Gokhran, on purchasing part of the company's raw materials. At that time, the first batch of diamonds was purchased. Another transaction could have taken place by the end of last year, the company said.

As a participant in the global diamond market, Russia is prepared to use Gokhran's resources to help the industry recover while adhering to the traditional "price-over-volume" principle, Deputy Finance Minister Alexei Moiseyev said. This approach involves limiting supply to support prices. The Finance Ministry may consider another diamond purchase from Alrosa after assessing the state of the diamond market in Q2 2025, Moiseyev said.

The federal budget for 2025-2027 has allocated up to 154.5 billion rubles ($1.55 billion) for Gokhran to acquire precious metals and gemstones.

Alrosa's cost-cutting program, which was announced at the end of last year, does not include the complete shutdown of low-profit deposits, Nikolayev said.

"We believe that if prices adjust, these deposits can be reintroduced into production. Moreover, most of them are alluvial," he said. The program had been approved by the region's leadership, he said.

The decision to implement cost-cutting measures was driven by the very difficult situation in the global diamond market, where hopes for the Chinese market did not materialize, as demand for diamond jewelry in China has not even approached pre-pandemic levels, Nikolayev said.

"Prices in the market are falling, and accordingly, we need to reduce our expenses," he said.

Sanctions have also had an impact. "Sanctions have not done any good for the global market either," he said.

Difficult decisions regarding cost optimization, particularly in terms of social responsibilities, will be carried out with minimal losses, he said.

"As for staff reductions, of course this is always a painful issue. It has significantly affected management personnel and engineering and technical staff. As for workers and shift employees, we are working with the management to reassign them within the company to areas where there is demand," he said.

Yakutia owns 25% plus one share of Alrosa. An additional 8% of the shares belong to Yakut municipal districts.